Why Your Business Shouldn’t Rush Into the On-Demand Economy

Many small business owners fear getting left in the dust by rivals popping up on new on-demand platforms. They worry that if they aren’t selling their services there, too, they’re at risk of becoming irrelevant.

In the on-demand economy, consumers and businesses can use smartphone apps to hire independent contractors and hourly workers to provide services for them. The platforms range from Handy, where on-demand workers will perform work like plumbing or cleaning your home, to Zeel, where you can have a licensed massage therapist come to your residence. There’s no denying that the industry has been growing at a clip. CB Insights, a venture capital database, reported that in the first four months of 2015, investors sunk $3.78 billion into on-demand and mobile startups. With this quick growth, more startups may emerge offer on-demand services in other service categories.

Despite the hype, if you’re a small business owner, there are plenty of other smart ways to grow your business without having to be subservient to on-demand platforms. And these alternative approaches will likely have a much greater positive long-term impact on your business.

Some consumers turn to on-demand platforms because they recognize the business name, so they trust that they will get good service. However, small businesses can combat this – and greatly expand their customer base – by, for example, soliciting reviews from satisfied clients on widely used sites like Facebook, Yelp! and Google+. Optimizing your website to make it mobile friendly can also be a direct route to more sales. Google recently began rewarding mobile-friendly sites in its organic search algorithm, which will help firms whose sites are easy to read on the screens of smartphones and tablets appear higher in mobile searches. Couple this with other smart marketing approaches such as providing compelling offers as well as leveraging technology like online appointment booking and accepting electronic payments, and you can compete with on-demand apps that draw customers in with the promise of a seamless online experience.

If you do decide joining an on-demand platform is the right thing for you, make sure to look at it as just one tool in your marketing and sales arsenal—but not the only one. Don’t think that this is going to be a quick fix that will solve all ills for your business. Many service providers do not make much money on these sites. Recent research by MBO Partners, a firm in Herndon, Va., that studies the on-demand economy, found that most people who work on on-demand platforms do it part-time. Among them, 56% earn $40,000 or less—from all sources of income, including their day jobs; another 36% report total earnings of $25,000 or less. Only 17% bring in $75,000 or more.

On-demand platforms also aren’t the only new players in the game. Small service businesses should also be considering new local marketplaces, like Amazon Local, which integrates services and online purchases. These options may be far more helpful to your business than joining an on-demand platform–but make sure to investigate them thoroughly and estimate what the likely return on investment will be.

Ultimately, deciding to join these new platforms or marketplaces, like every other business decision, will depend on your specific situation. You may be glad to bring in any income at all if you are just starting a business. But owners of more mature businesses may find that on-demand platforms are a small, ancillary source of income at best. When you’re in business for yourself, time is your number one commodity. If you market your business through the channels where it will really pay off—even the ones that don’t get a lot of hype—it will likely grow much faster.

Court Cunningham is the CEO of Yodle, a local online marketing company with 50,000+ customers, where he is responsible for developing and executing the overall strategy and direction of the business. Court has been the CEO since 2007.

2 thoughts on “Why Your Business Shouldn’t Rush Into the On-Demand Economy”

Great article Ramon! I own a dog walking agency and I was intimidated by the big on-demand companies, so I decided to create an on-demand mobile business platform called Handlr so that all of us small business owners can plug in right away and offer our customers the same on-demand app experience within an hour. It automates bookings, staff management, payment and more. myhandlr.com